Frozen microspheres of hydrogen (pellets) will be one of the target types for the future hadron physics experiment PANDA at FAIR (GSI, Darmstadt, Germany) [1]. Pellets with a diameter of 25– μm are generated about 3 meters above the interaction region, to which they travel with a velocity around 80 m/s inside a narrow pipe. The interaction region is defined by the overlap of the pellet stream and the accelerator beam and has a size of a few millimeters. One would like to know the interaction point more precisely, to have better possibilities to reconstruct particle tracks and events e.g. in charmonium decay studies. One would also like to suppress background events that do not originate in a pellet, but e.g. may occur in rest gas, that is present in the beam pipe. A solution is provided by the presented pellet tracking system together with a target operation mode that provides one and only one pellet in the interaction region most of the time. The goal is to track individual pellets in order to know their position with a resolution of a few tenths of a millimeter at the time of an interaction. The system must also be highly efficient and provide tracking information for essentially all pellets that pass the interaction region. Presented results from the design studies show that the goals can be fulfilled by this solution.